Target: ₹3,000

CMP: ₹2,603

Our recent interaction with SRF’s management gave us insights on the long-term opportunities in various sub-segments the company operates in.

Key takeaways: chemicals capex of about ₹12,000-13,000 crore over the next 5 years; goal to grow the chemicals business at 20 per cent while maintaining 20 per cent RoCE; accelerate growth of the pharma piece to more than 30 per cent; take the fluoropolymer revenue contribution to $150-200 million over the next 5 years; grab the incremental opportunities in HFOs, electronic and battery chemicals.

The capex implies that, going forward, the capex run-rate is going to be similar to FY23. SRF would not be keen to take up RoCE-dilutive projects. SRF would target more than 30 per cent growth in pharma revenue to take the revenue contribution (from pharma molecules) to about 25 per cent (vs. about 15 per cent currently).

To achieve its target of reaching $150-200 million revenues from fluoropolymers, SRF would need to deploy about $110-140 million. Besides, SRF is also eager to enter into the HFO space once the patents of various HFOs expire over the next 2-5 years.

SRF has a ready substitute for demand coming from older units carrying HFCF-22 in the form of HFC-467. Further, the company foresees ample demand growth in the medium term for HFC, especially HFC-32 for stationary refrigeration application.